Many bodies, so badly burned that they were unrecognisable, were piled in a corridor leading from the dance floor of the Ozone Disco Pub to the narrow entrance.
Survivors said many were trampled in a stampede. Others were crushed by a falling ceiling and wall.
Fire Inspector Claro Querubin said more than 135 bodies had been taken out of the disco in what officials called the country's biggest fire tragedy.
As many as another 50 bodies were thought to be covered by debris inside, he said.
"This is the worst fire in terms of casualties in the Philippines," said Manila fire marshal Enrique Linsangan, a 24-year veteran in the service.
Hospital officials said dozens of survivors had been brought in with third-degree burns. Many had to be sent to facilities some distance away because of a lack of space.
"We saw smoke and tried to run outside, but were caught in a stampede," said a survivor named Rose, who was burned on her feet, face and arms.
"I was stepped on, but managed to force my way out." She said two of her three friends were missing.
Marvin Reyes, a disc jockey, told how victims were screaming as their clothes and hair caught fire. "It was like hell," he said. "I tried to announce there was a fire, but the microphone stopped working."
Firemen, overwhelmed by the ordeal of taking out bodies from the charred disco, shared shots of gin to restore their resolve.
Many used bare hands to carry out the victims, who were so badly burned that their bodies stuck to each other. Rescuers had to be careful to avoid destroying the remains.
There was chaos around the building as distraught relatives searched for information about missing family members.
Many wrote the names of the missing on a list kept by rescuers which reached more than 100. An estimated 350 people were inside the disco at the time of the fire.
Fire officer Moises Marcelo said the fire started just after midnight and was put out some two hours later.
There was no official indication on the cause of the blaze, but radio reports said it was triggered by a cooking fuel tank that exploded.
"The lights went out and there was an explosion," revealed Aaron Cabronera, 17, who received leg injuries. He said a door that he was leaning against fell on top of him, saving his life.
The fire turned what was to have been a joyous celebration of the end of the school year for many into tragedy. Cabronera said several of the five friends who had joined him were missing.
The disco is popular among young people, particularly college students. It is believed a graduation party was in full swing when the inferno started.
Among the first to make it to safety was disco employee Juliette Jusay, 20. When she turned to look back she saw others with severe burns.
"They were all black and their hair was gone," Jusay said. She added that some were screaming: "Don't touch me, don't touch me."
Witnesses said they heard people screaming to be let out. "We were dancing. It was beautiful pop music. All of a sudden the lights went out, but I thought it was part of the effects." said Lorna Paredes, a 19-year-old commerce student.
A senior fire officer at the scene of the blaze aid the the club had no fire exits. Station commander Efrem Santos said the disco had only one door to the outside.
Manila regularly experiences many fires in March, when the weather is hot and dry. Fire officers have been called on to deal with more than 25 fires in the capital region so far this month.